Stock trading surged 70%, investment banking fees jumped 50%: Bank of America’s Q2 revenue far exceeded expectations, but the real test of costs is just beginning.

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Bank of America delivered a better-than-expected second quarter report driven by the dual engines of trading and investment banking.

Net profit of $9.1 billion and total revenue of $31.6 billion both significantly exceeded market expectations—however, behind this impressive financial report, non-interest expenses rose 8% year-on-year to $18.6 billion. On the same day, JPMorgan raised its full-year cost guidance to about $107.5 billion, as the “cost ledger” of major Wall Street banks is becoming the second unavoidable topic in this earnings feast.

The sales and trading division’s total revenue for the quarter soared 34% year-on-year to $7.1 billion, setting a historic record and far surpassing CEO Brian Moynihan’s previous growth expectation of only 15%.

In particular, equity trading revenue skyrocketed 70% year-on-year to $3.6 billion, marking Bank of America’s best quarterly performance ever; fixed income, foreign exchange, and commodities (FICC) trading revenue grew nearly 9% to $3.5 billion, again surpassing analysts’ general expectations. The sales and trading division recorded record income levels in the first half of 2026.

Investment banking also saw a strong rebound. Total fee revenue grew 50% year-on-year to $2.1 billion; M&A advisory fees surged nearly 68% to $558 million, equity capital market revenue was $535 million, and debt underwriting income was $1.1 billion—all significantly higher than analysts’ forecasts.

Driven by the AI-powered capital expenditure supercycle, the number of global mega-merger deals valued at over $10 billion hit a record level in the first half of 2026.

Bank of America played a key role in several landmark deals—acting as joint bookrunner for SpaceX’s record-breaking $2 trillion IPO, and as financial advisor in NextEra Energy’s $66.8 billion acquisition of Dominion Energy.

After the earnings report, Bank of America’s stock rose 2% intraday on Tuesday. Year to date, the stock is up about 9%, outperforming competitors JPMorgan and Wells Fargo; over the past 12 months, it has risen 28%, far outpacing the S&P 500 financial index’s 7.4% increase over the same period.

The “Volatility Dividend” of Trading: Acceleration from Q1 to Q2

Bank of America’s trading boom is not an isolated event, but a strengthening trend since the outbreak of Middle East geopolitical conflict.

In the first quarter, the bank’s equity trading revenue surged 30% to $2.8 billion, setting a then-record; the 70% growth in the second quarter means the trading desks not only held their ground but further amplified profitability in a persistently volatile environment.

Concerns over crude oil supply triggered by US-Iran tension pushed up oil prices, heightened the uncertainty of interest rates and inflation outlook, and prompted investors to frequently adjust their portfolios.

Such a high volatility environment directly translated into income growth at major bank trading desks. JPMorgan’s earnings, released on the same day, showed equity trading revenue soared 86% to $6 billion, and Wells Fargo’s investment banking fees increased 35%. Across Wall Street, the trading and investment banking lines delivered the best results in years this quarter.

AI Capital Expenditure Supercycle: A Thickening Investment Banking Pipeline

Stephen Biggar, Director of Financial Services Research at Argus Research, pointed out that the AI-driven capital expenditure supercycle is comprehensively benefiting stock issuance, M&A activity, and debt financing.

Global announced M&A deals reached $2.5 trillion in the first half of the year, with banks expected to earn income as deals close over the next 6-9 months.

Bank of America CEO Brian Moynihan said in the earnings statement that, amid a healthy economic backdrop, resilient consumers and businesses are turning to Bank of America for spending, borrowing, and investing. In the short term, business pipelines remain strong, and commercial lending has recovered.

CFO Alastair Borthwick emphasized in a media call: “Our strategy is working. We are making disciplined investments, achieving organic growth, expanding market share, and driving higher levels of growth and profitability.”

Rising Costs: A Common Theme for Wall Street

Despite revenue beating expectations across the board, cost pressures are becoming a common theme for this earnings season. Bank of America’s second quarter non-interest expenses rose 8% year-on-year to $18.6 billion, slightly above analysts’ expectation of $18.35 billion.

On the same day, JPMorgan further raised its full-year cost guidance to about $107.5 billion, exceeding the increase previously disclosed by CEO Jamie Dimon.

For net interest income, Bank of America’s second quarter increased 9% year-on-year to nearly $16 billion, exceeding the market’s expected growth of 8.5%. The average loan and lease volume in the quarter edged up 1% year-on-year to $321 billion, while resilient consumer spending provided stable support for interest income.

For investors, the core question ahead is: as the “volatility dividend” margin declines and the cost base has been raised, can the record growth in trading and investment banking continue into the second half?

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